What Goes Up Must Come Down! – Forex Trading News – Oct 10th 2014

Forex Market News

Bit of a tussle at the top end, what goes up must come down. Yesterday the bulls had tossed the bears into the air. But overnight the bears back slammed the bulls and then rubbed their noses in it. This kind of whippy action is to be expected as the potential trend changes. When the S&P500 gets under the August lows of 1890 (last is 1917) then, technically, it is bye bye up trend. VIX also ran higher and is above the “worry” level of 14 to be at 17.2 and will move higher. VIX is the fear indicator. It is the measure of the number of options taken out on equities to protect against large moves in the market (either up or down but most investors in stocks only buy downside protection). So as it begins to motor higher, more people are in fear of a major sell-off, the next step is the leveraged buyers to start selling. Then it will be outright sellers followed by the panic button.

A few US Fed officials out spruiking the “data not date” this week and one even saying: “I’ve said it often enough that I should probably have a T-shirt, but let me reiterate: The decision to raise rates will be data-driven, not date-driven,” Williams said in a speech in Las Vegas.

The Eurozone is still a basket case and will be for some time. Draghi overnight spoke a lot but said nothing really. He did say that he will expand stimulus if needed…we’ve heard that before. Interestingly he thinks they economies need structural reform (which is out of his hands, that is up to each individual euro satellite nation to do) before any recovery may happen. He is unhappy with inflation and cannot obviously getting it going so needs help, but is unwilling to do use stimulus to do it. He reckons rates may rise by 2017. Good luck with that mate. I prefer the reform idea over stimulus, but getting the nations on-board to do that will be tough. Look at Greece, riots on the streets. Imagine that kind of reaction across the continent. That is what is needed, that kind of tough policy making and few politicians these days are that strong, their backbones crumble under Twitter rants and the ignorant media who aim to sell fear only to be heard.